Credit Scores poised to get more personal

Many consumers applying for a mortgage are going to start sharing more personal information with lenders next year, like it or not.

FICO scores, the industry standard for determining credit risk in mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration, largely have been based on a person's credit history. But in an attempt to develop a more well-rounded picture of a person's finances beyond credit, tools are being developed to help the lending industry dig deeper.

Fair Isaac Corp., or FICO, the company behind the widely used scoring formula, and data provider CoreLogic this week announced a collaboration that will result in a separate score that will be available to mortgage lenders and incorporates information that will include payday loans, evictions and child support payments. In the future, information on the status of utility, rent and cellphone payments may also be included.

Separately, last month, the big three credit reporting agencies, Experian, Equifax and TransUnion, began providing estimates of consumer income as a credit report option. And earlier this year, Experian began including data on on-time rental payments in its reports.

The new information could prove to be a double-edged sword for consumers: It may open the door to homeownership to some consumers who have, according to industryspeak, a "thin file" or worse, a "no-file," meaning they lack sufficient credit histories.

On the other hand, the extra information may make a borderline borrower look even worse on paper. Also, it's unlikely to quiet critics who complain that too much emphasis is put on a single number.

Still, there is thought among researchers that consumer transparency, if it demonstrates both good and bad behavior, has its place.

"You're trying to convince someone to loan you an awful lot of money at a low interest rate," said Michael Turner, president of the Policy and Economic Research Council. "Only you know whether you're going to pay it back. There is a harmony in this data exchange."